EQUITY MARKETS
February saw a continuation of the cautious optimism observed in January, with major indices posting solid gains across the board.
Performance Highlights: The Dow Jones Industrial Average rose by 0.97%, the S&P 500 climbed 3.99%, and the Nasdaq Composite achieved an all-time high, surging by 4.14%. The CAC 40 and Dax also say positive momentum, with Asia also tracking higher – the Japanese stock market finally surpassing its all time high last seen in 1989. Digital asset markets took off in January with Bitcoin and Ethereum returning nearly 45% in the month alone.
SECTOR LEADERS
Growth-oriented sectors dominated the month. Technology (+6.1%) led the pack, fuelled by strong earnings reports from tech giants and continued investor enthusiasm for innovation and artificial intelligence. Consumer Discretionary (+5.2%) also performed well, potentially reflecting consumer confidence and pent-up demand.
MARKET HEADLINES
Earnings Season Boost: Positive earnings reports from major companies across various sectors boosted investor confidence.
Disinflationary Trends: Continued signs of easing inflation further fuelled market optimism, raising hopes for a less aggressive stance on interest rates from central banks.
Technological Innovation: Investor excitement continues in the AI space, as chip stocks deliver numbers that have hugely surpassed analyst expectations.
GEOPOLITICAL EVENTS AND CENTRAL BANK NEWS
Presidential primaries were held during the month, with Trump taking Michigan and South Carolina, although in line with expectations. Central Bank Policy: US jobs numbers surprised on the upside with non Farm Payrolls registering 315,000 – above analyst expectations. Meanwhile, annual inflation slowed to 3.1% from 3.4% in January.
MARKET MOVERS
FOMC Policy Statements:** The Federal Open Market Committee (FOMC) meeting minutes revealed a more cautious approach to future rate hikes, triggering a rally in equity markets.
Strong Breadth Across the Board:** Global equities are generally a picture of strength at the moment – all sectors are holding up well, emerging markets seem to have turned and value and growth styles both posting sold returns. The trend is your friend and whilst some digestion will be required at some point, there is little to suggest an imminent major correction in markets.
China Stimulus:** remains a potent source of energy, yet to contribute to financial market performance. Additional liquidity could be the fuel for significant outperformance of materials, cyclicals and commodities in the coming months.
OTHER ASSET CLASSES
Fixed Income: Bond yields experienced a moderate rise in February as the market anticipated a potential slowdown in interest rate cuts. The 10-year U.S. Treasury yield ended the month slightly above 4%.
Currencies: The U.S. Dollar remained relatively stable against major currencies after initial fluctuations triggered by the Fed’s policy signals.
Commodities: Overall commodity prices were mixed. While crude oil prices remained under pressure due to demand concerns, livestock prices increased yet the ag complex generally saw modest losses. Nickel gains, yet other industrial metals fell.
Precious Metals: Gold prices fluctuated throughout the month, ultimately ending February slightly lower than January. Silver prices followed a similar pattern.
OVERALL
Whilst government bond yields are mixed, credit spreads continue to make new lows underlying the generally risk on sentiment amongst financial markets. Tech/growth and momentum continue to led the pack, although markets will need to see wider participation (and there are signs this is happening), to continue to support gains. A pause that refreshes would not be unusual.
